By Dan Levine

Fri Jan 27, 2012 6:40pm EST

(Reuters) – Apple’s Steve Jobs directly asked former Google Chief Executive Eric Schmidt to stop trying to recruit an Apple engineer, a transgression that threatened one junior Google employee’s job, according to a court filing.

The 2007 email from Jobs to Schmidt was disclosed on Friday in the course of civil litigation against Apple Inc, Google Inc and five other technology companies. The proposed class action, brought by five software engineers, accuses the companies of conspiring to keep employee compensation low by eliminating competition for skilled labor.

In 2010, Google, Apple, Adobe Systems Inc, Intel Corp, Intuit Inc and Walt Disney Co’s Pixar unit agreed to a settlement of a U.S. Justice Department probe that bars them from agreeing to refrain from poaching each other’s employees.

According to an unredacted court filing made public in the civil litigation on Friday, the now-deceased Jobs emailed Schmidt in March 2007 about an attempt by a Google employee to recruit an Apple engineer. Schmidt was also an Apple board member at the time.

“I would be very pleased if your recruiting department would stop doing this,” Jobs wrote.

Schmidt forwarded Job’s email onto other, undisclosed recipients.

“Can you get this stopped and let me know why this is happening?” Schmidt wrote.

Google’s staffing director responded that the employee who contacted the Apple engineer “will be terminated within the hour.”

He added: “Please extend my apologies as appropriate to Steve Jobs.”

Google spokeswoman Niki Fenwick said on Friday the company, “has always actively and aggressively recruited top talent.”

Apple representatives did not immediately respond to requests for comment.

The tech defendants have asked a U.S. judge in San Jose, California to quickly dismiss the civil lawsuit, arguing that the companies engaged in bilateral anti-poaching deals to protect collaboration. The companies did not participate in an “overarching conspiracy,” they argued in filings.

But at a court hearing this week, U.S. District Judge Lucy Koh said the civil lawsuit will proceed, although it may be split up into multiple potential class actions.

Among the revelations stemming from the civil litigation is a 2007 note from Palm’s chief executive to Apple’s Steve Jobs, saying that an anti-poaching agreement would be “likely illegal.

The latest court filing also refers to a 2007 note from Intel chief executive Paul Otellini discussing that company’s agreement with Google.

“Let me clarify. We have nothing signed,” Otellini wrote. “We have a handshake ‘no recruit’ between eric and myself. I would not like this broadly known.”

Intel representative Sumner Lemon said on Friday the company, “disagrees with the allegations contained in the private litigation related to recruiting practices and plans to conduct a vigorous defense.”

The case in U.S. District Court, Northern District of California is In Re: High-Tech Employee Antitrust Litigation, 11-cv-2509.

(Reporting By Dan Levine; editing by Tim Dobbyn and Andre Grenon)

Article source: http://feeds.reuters.com/~r/reuters/technologyNews/~3/96IVBxYUwDM/us-apple-lawsuit-idUSTRE80Q27420120127

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By Lauren Tara LaCapra

Fri Jan 27, 2012 5:15pm EST

(Reuters) – Facebook’s initial public offering is likely to set a new standard for how low investment banks are willing to go on advisory fees to win big business.

The world’s largest online social network is expected to tap public markets for $10 billion in the coming months in an offering that will value the company at up to $100 billion, according to sources familiar with the planned IPO. It will be one of the biggest U.S. market debuts ever, and a prized trophy for the investment bankers seeking to win lead advisory roles.

That has set up a fierce competition on Wall Street, particularly between the presumed front-runners Morgan Stanley and Goldman Sachs Group Inc, which may offer their underwriting services for as little as 1 percent of gross proceeds, bankers and industry observers said.

That would be far less than the 7 percent fee that smaller deals typically fetch, or the 2 or 3 percent that large deals tend to command.

“The Facebook IPO will be iconic,” said James Montgomery, chief executive of San Francisco-based investment bank Montgomery Co, which advises tech companies on mergers, acquisitions and private placements.

Facebook can easily negotiate a 1 percent fee for the entire group of investment banks that will peddle its shares, Montgomery said, “much to the chagrin of the underwriters.”

Such a low fee is practically unheard of for investment banking deals, apart from the offerings of bailed-out companies General Motors Co, American International Group Inc and Ally Financial Inc, which sold shares held by the U.S. government in the aftermath of the financial crisis.

But Facebook has several advantages that will allow the company to haggle for a lower fee: it will be an easy sell as hoards of investors are keen to jump on the social media trend, and even a 1 percent fee would reap $100 million in revenue for investment banks, sending a lead advisor to the coveted No. 1 spot on IPO league tables.

“There’s no other IPO like this,” said Lee Simmons, a tech specialist at Dun Bradstreet. “It’s kind of the 800-pound gorilla for the tech sector.”

The Wall Street Journal reported that Facebook plans to file IPO documents with U.S. securities regulators as early as Wednesday, and is close to picking Morgan Stanley as the lead underwriter.

The typical IPO that raises less than $500 million incurs a 7 percent fee — what’s known as “the 7 percent solution.” But as IPOs grow in size, the fee percentage shrinks.

Investment banks usually earn fees of 4 percent to 5 percent on IPOs of more than $1 billion, but deals from Silicon Valley tend to carry a premium. U.S. tech IPOs of at least $1 billion carried an average fee of 5.8 percent from 2000 to 2012, on average, according to Thomson Reuters data.

In the case of Facebook — whose T-shirt-wearing, 27-year-old chief executive, Mark Zuckerberg, is said to appreciate status updates more than stock brokers — it’s unlikely advisors will be able to command the standard rate.

“These Valley types think this whole process could be automated and they don’t have to pay 7 percent to these flashy, French-cufflink-wearing Wall Street types,” said Eric Jackson, founder and managing member of Ironfire Capital, a technology-focused hedge fund, who has interacted professionally with executives at Facebook and other social-media companies.

PRICING DILEMMA

Facebook’s offering will be the largest ever IPO from Silicon Valley, as well as the largest global high-tech IPO since the dot-com bubble burst. The most recent U.S. social-media IPO, Zynga Inc, raised just one-tenth of the proceeds Facebook is hoping for.

Winning a lead advisory role on Facebook has become a make-or-break contest for tech bankers such as Goldman’s George Lee, Morgan Stanley’s Michael Grimes and Credit Suisse’s Bill Brady.

Morgan Stanley and Goldman Sachs have been in communication with Facebook for months and already offered pitches to its executives in hopes of becoming lead adviser, according to sources briefed on the meetings.

Wall Street is now waiting to hear who will win the coveted “lead left” title, referring to where the top underwriter’s name will appear on the IPO prospectus.

“Facebook is one of the most well-known brands around the globe,” said George Papaioannou, a business professor at Hofstra University who has studied underwriting competition among investment banks. “The underwriters will have to do very little convincing to investors, and that gives Facebook a huge negotiating advantage.”

Investment banking fees are not usually the primary concern for IPO candidates, who must nail down the right offering price and sell shares to the right mix of investors, Papaioannou said.

If the offering price is too high, the company and its underwriters risk burning IPO investors. If the bar is set too low, the stock issuer risks leaving money on the table. And if the mix is not right — with more short-term traders than long-term investors — a stock can become highly volatile in the days and weeks following its debut on an exchange.

Zynga, which makes some of the most popular online games that are played on Facebook, is a prime example. Co-managed by Goldman and Morgan Stanley, the IPO was priced at $10 a share in mid-December. IPO investors watched the stock fall 5 percent on the first day of trading. Zynga was quoted at $9.72 on Friday.

Similarly, online coupon-deals site Groupon Inc priced its IPO at $20 a share on November 4, but its shares fell as much as 26 percent in the first two weeks of trading. The stock was trading at $19.78 on Friday. Goldman, Morgan Stanley and Credit Suisse were co-managers of the IPO.

HANDLE WITH CARE

The other edge of the IPO sword can cut just as sharply for hot tech stocks.

LinkedIn Corp, which raised $353 million last May in an IPO priced at $45 a share, watched the stock soar as high as $122.70 on the first day of trading. LinkedIn shares have drifted down to the low $70 range, but the price range to date indicates that the company could have raised another $440 million to $1 billion in extra money if the IPO were priced more aggressively. Morgan Stanley was in the lead left position.

A sharp fluctuation in price soon after Facebook’s IPO “would really embarrass Facebook and the underwriters,” given the recent history of social-media IPOs, said Papaioannou

The Zynga, Groupon and LinkedIn deals garnered fees of 3 to 5 percent.

To be sure, the banks that are vying for a lead position on Facebook’s IPO will have to do more than lowball on price. They will also have to convince the Palo Alto, California-based company that the deal will go off without a hitch.

As Facebook’s size and influence have grown in recent years, its actions — whether changes to privacy policies on its popular networking site, or its interactions with Wall Street bankers — have come under intense public scrutiny.

Goldman’s handling of a private sale of $1.5 billion worth of Facebook shares to wealthy clients last year stirred enough controversy that the bank was forced to limit the offering to non-U.S. investors.

That misstep may have cost Goldman some goodwill with Facebook, industry observers said. And, as a company that makes money from a broad base of users, it also forces Facebook to consider whether its IPO will give unfair advantages to well-heeled investors.

“Two reasons I think Morgan Stanley will get the lead: one, they have a great retail distribution platform with the Smith Barney franchise and, two, I don’t think Facebook is overly happy with Goldman Sachs,” said Jeff Sica, president and CEO of SICA Wealth Management, who has bought shares of Facebook in private, pre-IPO markets for clients.

Morgan Stanley was the top bookrunner for global high-tech IPOs last year, with $2.2 billion in global proceeds and 10.9 percent market share. It also led the pack in U.S. high-tech IPOs, according to Thomson Reuters data. Goldman Sachs was the runner up with $1.9 billion in global fees and 9.2 percent market share, and ranked No. 3 in U.S. high-tech IPOs behind JPMorgan Chase Co.

A less measurable but equally important factor in obtaining the lead IPO position is whether bankers can connect with decision-makers at Facebook on a personal level.

“It’s really going to be the banker that understands and is sensitive to Zuckerberg and the executive team’s needs,” said Dun Bradstreet’s Simmons. “Whoever does that successfully will get the bragging rights, the proverbial brass ring of tech IPOs.”

(Reporting By Lauren Tara LaCapra, editing by Tiffany Wu)

Article source: http://feeds.reuters.com/~r/reuters/technologyNews/~3/Jg2SnkkO57s/us-facebook-ipoview-idUSTRE80Q21920120127

By Sinead Carew and Nicola Leske

NEW YORK |
Fri Jan 27, 2012 9:39pm EST

NEW YORK (Reuters) – Research in Motion’s Thorsten Heins plans to waste no time in his new job. The BlackBerry maker’s chief executive said he will present the board with his plan for company’s future in just a matter of weeks.

The German-born executive, who took over from two longstanding co-CEOs on Saturday, said his plans for RIM would be “significant” though he did not divulge details in an interview with Reuters.

“I will have time with the board in two weeks to present my ideas and changes,” Heins said.

But the executive, who was promoted from the role of chief operating officer, said he has already done groundwork to tackle his company’s most pressing problem – persuading the U.S. market to covet the BlackBerry again.

While RIM is growing in other countries, Heins conceded that its U.S. business is in need of a major revival after losing out to rivals like Apple Inc’s iPhone at U.S. service providers and corporations, where it once had a clear advantage among employees heavily dependent on its email service.

“In general I wouldn’t consider RIM as a turnaround candidate. It is a turnaround candidate in the U.S.,” he said. “We lost market share in this market quite substantially. That is something that we have to address.”

While U.S. operators such as Verizon Wireless and ATT Inc have helped BlackBerry with heavy advertising and promotions in the past, these operators have been much more focused in the last few years on devices like iPhone and smartphones based on the Google Inc operating system.

Heins’ quest to regain ground with these operators has been complicated by the fact that RIM had to announce in December that it is delaying the launch of phones based on BlackBerry 10 – its next-generation software – until the later part of 2012 as it is awaiting the availability of a high-powered chip.

The executive would not say when exactly these phones would hit the market but implied that they would arrive in time for the year-end holiday-shopping season in the fourth quarter.

So in the meantime, Heins will concentrate on getting the most current BlackBerrys into more consumers hands. He noted that only 20 percent of U.S. BlackBerry users have the company’s latest phones, which he says are competitive with rival smartphones.

The rest of RIM’s U.S. customers have devices with older RIM software, some of which are “two generations behind,” he said.

To overcome this, RIM has devised a new upgrade plan with U.S. operators to promote phones with the BlackBerry 7 system, which was launched in August last year.

“All the plans are ready. The carrier agreements are all ready. Now we have to get off the starting grid. Now we need to execute that upgrade program,” Heins said.

While he did not want to disclose specifics about the new agreements, Heins said RIM could look at new ways of bundling different devices together or offering carriers smartphones with a package of pre-loaded applications.

He is also betting on the company’s PlayBook tablet to compete with the Apple iPad tablet. This spring, Heins said that RIM will launch a version of the Playbook, with a high-speed wireless connection based on LTE – a technology that the top three U.S. operators are building into their networks.

Verizon Wireless and ATT are already promoting LTE devices including smartphones and tablets from RIM’s rivals. RIM’s first smartphones with LTE connections will be in the company’s BlackBerry 10 line-up, Heins said.

MOMENT OF SURPRISE

In his first presentation to Wall Street as CEO earlier this week, Heins said he did not think the company needed drastic change, causing some analysts to worry that the executive would not do enough to reverse the company’s fortunes.

But the executive said on Friday that he was merely telling Wall Street that he does not want to change the core of RIM.

“Is RIM up for sale, is RIM up for a split-up?” He rejected those possibilities as “a drastic, seismic change because it would tear the company apart.”

Heins, who has been with RIM for four years after spending over two decades at German engineering group Siemens, was became COO responsible for software and products seven months ago.

He explained that RIM had succession plans for co-CEOs Mike Lazaridis and Jim Balsillie in place for some time and that he had an inkling that he was being groomed to follow in their footsteps when he was named COO.

“The moment they tell you it’s still a surprise,” Heins said, smiling broadly and adding that he immediately said yes.

Lazaridis and Balsillie, who turned the BlackBerry maker into a global company and a household name, stepped down last week but will remain on the board.

Some analysts have worried whether these executives would have too much of a say in the future strategy of the company because of their position on the board.

Heins said, it would be an advantage to be able to tap into the experience and company knowledge of RIM founder Lazaridis, but he made it clear that he would be the one calling the shots.

“What I do with the company is my decision. The CEO runs the company.”

(Reporting By Sinead Carew; Additional reporting by Alastair Sharp and Peter Lauria; Editing by Gary Hill)

Article source: http://feeds.reuters.com/~r/reuters/technologyNews/~3/E6r1NAxXG50/us-researchinmotion-ceo-heins-idUSTRE80R05L20120128

By Harichandan Arakali and Farah Master

BANGALORE/HONG KONG |
Thu Jan 26, 2012 10:08pm EST

BANGALORE/HONG KONG (Reuters) – Investors in Apple Inc have a one-word answer for those who wonder whether this corporate juggernaut can maintain its phenomenal momentum in the years ahead: Asia.

The iconic maker of the iPhone, iPad and iPod has barely scratched the surface of the region, home to around 60 percent of the world’s population — a fact that Apple itself alluded to in reporting an eye-popping set of earnings this week.

Apple’s numbers, which included a 70 percent jump in December-quarter revenues and a doubling in profits, actually excluded sales of its hottest new product, the iPhone 4S, from its biggest single potential market, China.

The latest iPhone did not go on sale there until this month, and there were near-riots as demand immediately ran ahead of supply, with empty-handed shoppers throwing eggs at Apple’s typically minimalist glass-fronted store in Beijing.

And in China’s long shadow, other virtually untapped Asian markets such as India and Indonesia are waiting to be conquered, together home to around 1.4 billion people.

“I want an iPhone because of the lifestyle, it’s a trendy phone to have,” says 19-year-old Dylan who works at a hip fashion boutique, The Goods Dept, in downtown Jakarta.

Sporting a trendy haircut, a long pendant necklace, jeans and vintage Ray Ban sunglasses, he is typical of style-conscious consumers everywhere to whom Apple’s sleek devices are not so much useful gadgets as essential fashion accessories.

But Dylan, and hundreds of millions of other aspiring Apple customers from Jakarta to Shanghai to Mumbai, have a problem: they cannot afford to buy the main objects of their desire. At about $830, even the older iPhone 4 costs twice the monthly salary of a young foreign exchange dealer in Jakarta.

That simple fact — unaffordability across emerging Asia — has begun to test faith in Apple’s ability to maintain its torrid sales growth without a big foray into a new product category, like TV. Though its shares keep rising, its future earnings become cheaper: valued at about 30 times earnings a few years ago, Apple’s stock now trades at half that multiple.

As Apple waits for Asian incomes to catch up, there is a risk that savvy competitors, especially main rival Samsung Electronics Co, could catch it napping with cheaper products that are becoming better, and cooler.

Indonesia remains a redoubt of Research in Motion Ltd’s BlackBerry, largely because it is more affordable, according to those like Dylan who use it: “If they (iPhones) got cheaper, I would consider buying one,” he says matter-of-factly.

Pricing is also an issue in India, where the smartphones of choice belong to Samsung, maker of the Galaxy, and to Nokia and RIM’s BlackBerry.

“I would much rather have bought one but I didn’t have enough money to buy it. It’s as simple as that,” said Soubhik Mukherjee, 26, a social-media marketing strategist in New Delhi.

“It’s quite ridiculously priced in India … I don’t have that kind of disposable income.”

Mukherjee plans to buy a smartphone next month and is considering a BlackBerry or a Samsung Galaxy. “Apple’s biggest strength till now has been the user interface. It is the sleekest phone possible, the possibilities, design, basically the App store … But I guess now there is an alternative. Two years ago it wasn’t there, but now it’s there.”

THE CULT OF APPLE

Industry experts say Apple could develop a cheaper version of iPhone for the big Asian markets, without jeopardizing its prodigious profit margins, but other obstacles would remain, such as compatibility of new products with local telecoms networks and how to distribute them.

In China, for example, network technology is not sufficient to fully support iPhone and iPad capabilities, so some customers there cannot surf the Internet through either device unless they connect to a WiFi hotspot such as at a cafe or hotel.

China’s biggest service provider, China Mobile Ltd with more than 600 million subscribers, may not have matching technology in place commercially until late this year or 2013.

Network problems also exist in India where 3G telecom services are only now starting to be rolled out, just as Apple prepares for the 4G revolution in its advanced markets.

The pick-up of 3G in India has been slower than expected, partly due to high service prices but mainly because most Indians still use phones just to talk or send text messages. Internet browsing and making video calls are a technological world away for those living outside India’s cities.

Even after overcoming Asia’s network challenges, Apple still needs to cater for the region’s fondness for pre-paid phones. Consumers prefer not to sign up for 12-month or two-year contracts under which telecoms firms are more likely to subsidies the cost of an iPhone and help drive sales.

“I don’t see the carriers subsidizing the cost of the handset,” said Anshul Gupta, principal research analyst at consultancy Gartner Inc.

“There’s no money with the consumer, there’s no money with the carriers … When they (carriers) subsidies the cost of the handset, they will have to pay Apple the money upfront.”

DON’T WORRY, JUST WAIT

Despite signs that Asia is not all low-hanging fruit, ripe for the picking by Apple, some industry analysts are confident the region’s collective yearning for an iPhone will ultimately be satisfied, and Apple’s profits will keep soaring as a result.

China has more than 950 million mobile phone users, more than Europe’s population, and its economy threatens to overtake the United States as the world’s largest within 15 years.

Barclays Capital says Apple’s five stores in China and one in Hong Kong are its busiest and among its best revenue-generators on the planet, a hint of the potential in coming years as it confronts Samsung on its Asian home turf.

Chinese demand is so strong that smuggling of real iPhones and sales of fakes are rising and copy-cat stores masquerading as real Apple outlets — and selling genuine Apple products — have sprouted up everywhere from Beijing to Kunming.

“Network incompatibility and those kind of issues will probably get resolved very quickly. I don’t think that is an issue which could be a real hurdle,” said Gokul Hariharan, an analyst at J.P. Morgan in Hong Kong.

“Pricing, probably yes, would need to come down over time to enable market penetration, but I think for now the brand is basically viewed more like an aspirational brand… Even 10 to 15 percent penetration is actually quite a high number.”

Around the region, Apple distributors are finding novel ways to ease the burden of buying an iPhone or an iPad. Croma, an Indian electronics store chain store owned by the Tata Group, is offering a WiFi-only version of the iPad 2 for a down-payment of just 2,458 rupees ($50) with the rest due in 12 equal monthly installments.

Currently, though, Apple’s overall sales in the Asia-Pacific region, excluding the mature market of Japan, account for less than a fifth of group sales and the penetration of the iPhone, its top seller, trails behind its biggest rival, Samsung.

For some analysts, this is Apple’s biggest risk: while it waits for Asians to scrimp and save for an iPhone or an iPad, these consumers instead develop a taste and a loyalty to other products such as Samsung’s Galaxy smartphones and tablets.

Apple’s share of the smartphone market has more than doubled in China since the first quarter of 2010, but Samsung, which recently passed Apple as the world’s top smartphone maker, has meanwhile seen its share more than quadruple.

Apple stole back its global lead with sales of 37 million iPhones in the December quarter, more than double its sales from a year earlier, versus 36.5 million smartphone sales for Samsung, according to research firm Strategy Analytics.

But other hungry competitors are also aggressively targeting China and eyeing other new Asian markets.

China’s own Huawei Technologies and ZTE Corp are producing smartphones for less than 2,000 yuan ($320), half the price of a basic iPhone 4.

APPLE ENVY

Apple’s new boss, Tim Cook, who took over as chief executive shortly before founder Steve Jobs died in October, is targeting China aggressively and has indicated that Apple’s experience there could help it to penetrate other new Asian markets.

Apple has hinted that adding carriers is probably one way to expand in these countries, but no announcements have been made.

“I have tried to be very clear in the past, and I will do so again, that we have a ton more energy in the China market today,” Cook said in presenting Apple’s results on Tuesday.

“China is an extremely important market for us and we continue to look at how to grow it further.”

Some analysts say Apple needs to hasten its Asian expansion, developing cheaper handsets and working with more telecoms carriers in the region, but confidence remains high that it can conquer new markets and keep the juggernaut rolling.

In Indonesia, consumers like shop assistant Dylan will be waiting for it.

“The chance for Apple to dominate the market is there, perhaps over three years from now as our GDP per capita is increasing and the iPhone price is going down,” said Harry Su, head of research at Jakarta-based PT Bahana Securities.

“I’m sure many Indonesians would love to buy an iPhone.”

(Additional reporting by Janeman Latul, Camilo Mejia and Estelle Griepink in JAKARTA, Miyoung Kim in SEOUL, Devidutta Tripathy in NEW DELHI, Lee Chyen Yee in HONG KONG and Poornima Gupta in SAN FRANCISCO; Writing by Mark Bendeich; Editing by Neil Fullick and Alex Ricardson)

Article source: http://feeds.reuters.com/~r/reuters/technologyNews/~3/JEH25WLBOdE/us-apple-markets-idUSTRE80Q07C20120127

By Miyoung Kim

SEOUL |
Thu Jan 26, 2012 10:04pm EST

SEOUL (Reuters) – Samsung Electronics Co posted a record $4.7 billion quarterly operating profit, driven by booming smartphone sales, and will spend $22 billion this year to boost production of chips and flat screens to pull further ahead of smaller rivals.

The South Korean firm, the world’s top technology firm by revenue, is locked in breakneck competition with Apple Inc in the red-hot smartphone market, and said its telecoms business earned a record 2.64 trillion won profit in October-December on increased sales of its flagship Galaxy smartphones.

“The battle of the two big smartphone powers, Apple versus Samsung, will go on,” said Baik Jae-yer, fund manager at Korea Investment Management, which has around 9 percent of its portfolio in Samsung stock, according to end-September filings.

“The smartphone market will expand this year to more mid-and low-end models that are affordable to the wider public,” Baik said. “Rather than focus on market share, I’d point out the strong contribution of Samsung’s handset business to earnings growth and margins.”

Samsung’s October-December operating profit of 5.3 trillion won was broadly in line with its earlier estimate and topped the previous record profit of 5 trillion won in the second quarter of 2010. The profit was up 76 percent from a year ago and 25 percent higher than in the third quarter.

Samsung trails Nokia in the overall mobile phone market, competes with Sony Corp and LG Electronics Inc in televisions, Toshiba and Hynix in chips and LG Display in displays.

Samsung will increase spending this year by 9 percent to 25 trillion won – more than the GDP of leading cocoa producer Ivory Coast – with 15 trillion won going to the chips division, 6.6 trillion won to flat screens and the rest to boosting overseas production capacity and new research and development centers.

APPLE BATTLE

Apple, overtaken by Samsung as the world’s biggest maker of smartphones in the third quarter, looks sure to have regained top spot in the fourth quarter, with record sales of 37.04 million iPhones.

Samsung did not provide its own sales volume data for the fourth quarter, but said smartphone shipments rose by around 30 percent, suggesting sales of around 36 million, in line with analysts’ estimates of 35-37 million.

Smartphones account for close to a third of Samsung’s total handset shipments, according to data from industry research firms.

Samsung, which only entered the smartphone market in earnest in 2010, some three years after Apple introduced the iPhone with the touchscreen template, has adopted the U.S. company’s breakthrough concept probably better than other handset makers – and now seeks to offer the Apple experience at a better price, with better functionality.

Apple is Samsung’s biggest client, buying mainly chips and displays, and the two firms are locked in a bruising patent battle in some 10 countries from the United States to Europe, Japan and Australia as they jostle for smartphone and tablet supremacy.

Apple, though, is streets ahead in profitability. It generates half its revenue from the iPhone, boasts a 37.4 percent operating margin, versus Samsung’s 11 percent, and its $17.3 billion operating profit is almost four times what Samsung earned from selling phones, chips, flat screens and TVs combined.

“Apple had good sales, but it’s very unlikely this will be a trend that will overwhelm Samsung later,” said Kim Young-chan, analyst at Shinhan Investment Securities, noting the likely impact on Apple sales from year-end promotions and the death of founder Steve Jobs.

“It’s unlikely Samsung and Apple will fight over each other’s market share, but they will eat up the market share of smaller companies like HTC and RIM,” Kim said.

Samsung forecast its strong momentum in mobiles would continue this year and it aimed to maintain 15 percent margins from the business, though it could come under renewed consumer pressure if and when Apple brings out next-generation iPads and iPhones.

“Samsung is playing catch-up with Apple in smartphone sales volume, but it’s tougher to catch up in terms of margins,” said Lee Yong-jik, fund manager at PineBridge Investment, which owns nearly 2.5 million Samsung shares, according to an end-November filing. Lee forecast Samsung would ship 150-170 million smartphones this year, from below 100 million last year.

“But price competition will intensify, putting its handset margins under pressure,” added Kim.

CHIPS, FLAT SCREENS UNDER PRESSURE

Samsung faces headwinds this year, however, as global PC growth slows, likely denting sales of its core computer memory chips.

The company is looking to weather a squeeze on memory chips through new revenue sources such as mobile processing chips and high-end OLED diplays. Rivals are increasingly turning to Samsung for components to power their tablets and smartphones.

Samsung makes mobile processors that power Apple’s iPhone and iPad as well as its own Galaxy mobile products.

The company has warned that oversupply in dynamic random access memory (DRAM) chips will continue this quarter due to slack computer sales, while demand for flat screens is likely to remain subdued at least until March.

Yet Samsung is the only profitable DRAM chipmaker and is likely to fare better than rivals, as it invests heavily to cut production costs with finer processing technology.

Shares in Samsung, also the world’s top maker of memory chips and TVs, have risen by close to a fifth in the past three months and hit a life high of 1.125 million won earlier this week, outperforming a 3 percent gain on the KOSPI.

The stock was up 0.4 percent in Seoul on Friday at 1.118 million won, while the broader market was up 0.3 percent.

(Additional reporting by Seoul newsroom; Editing by Jonathan Hopfner and Ian Geoghegan)

Article source: http://feeds.reuters.com/~r/reuters/technologyNews/~3/E9_Jhr0n6Io/us-samsung-idUSTRE80P1KY20120127